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I study the labor market risks associated with being self-employed. I document that the self-employed are subject to larger earnings fluctuations than employees and that they frequently transition into unemployment. Given the self-employed are not eligible to unemployment insurance, I analyze the provision of benefits targeted at these risks using a calibrated search model with (i) precautionary savings, (ii) work opportunities in paid- and self-employment, (iii) skill heterogeneity. This exercise suggests that extending the current US unemployment insurance scheme to the self-employed comes with a clear increase in the transition rate from self-employment to unemployment and an unequal benefits to contributions ratio across skill groups. At the calibrated parameters, the self-employed in the middle of the skill distribution lose welfare.
Authors
Research Associate New York Fed
Richard is a Research Associate and an Assistant Professor at the Norwegian School of Economics, focusing on labour, macro and search.
Working Paper details
- DOI
- 10.1920/wp.ifs.2024.0124
- Publisher
- Institute for Fiscal Studies
Suggested citation
Audoly, R. (2024). Self-employment and labor market risks. 24/01. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/self-employment-and-labor-market-risks (accessed: 19 May 2024).
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